How to Launder Money - Swiss Style

An interesting crime story has come out in France and Switzerland. It may prove to be the nail in the coffin for bank secrecy in Switzerland.

The Swiss and French police arrested seventeen individuals a week ago (including an assistant Mayor in Paris). A woman (known only as “M”) is the center of attention of a drug smuggling ring. Apparently she ran a very big operation smuggling marijuana from Morocco into France.

Authorities followed the money from the drug operation from France to Geneva, Switzerland, where the loot was laundered through HSBC and GPF SA (never heard of them). This was a family affair; M’s brothers were working for the Geneva based banks.

The money laundering operation is an interesting part of the story. The sequence of events:

B) The cash from drug sales all over France were brought back to Paris.

C) M’s brothers in Geneva knew wealthy individuals in France (and presumably Germany too) who had “Black Accounts” in Switzerland. (Nothing to do with the drug smuggling)

D) Individuals who have Black Accounts in Switzerland have a noose around their neck. Switzerland (with a gun to its head) is negotiating tax treaties with all of its neighbors that would result in divulging the “names” of the account holders.

E) European Black Account holders know the clock is ticking. They know the result will be that they will lose all, or a big part, of the money they have stashed in Swiss banks. (That’s what happened to the US “names”)

F) Black Account holders want their money back, but they can’t transfer the money to another bank, as bank wire transfers are completely transparent to authorities.

G) The only solution for Black Accounts is to get access to cash. This is very hard to do, as there are guards on Swiss borders, and one can’t really trust the Swiss bankers any longer.

- In return, the Black Accounts were debited (or closed) in Switzerland.

- The money from the Black Accounts was transferred to a separate account controlled by M’s brothers.

- M’s brothers are Swiss citizens, and as a result have banking secrecy laws that protect them. When the money finally got into the brother’s accounts, the laundering has been completed.

- M charged a fee of 8% for the laundering. The drug money was transferred to the black account holders. Everyone was happy with this solution.

According to news reports (Link)the amounts involved are in excess of $100Mn. In the scheme of things this is not such a large amount, but is sure makes the Swiss banking industry look bad. The head of the Geneva Financial Center, Bernard Droux, had this to say:

“We were surprised that it should still be possible to do this today. This is a practice that has been forbidden by law for more than 20 years,”

"Shocked" you say? Sorry Bernard, this type of scam has been going on for the past sixty years!

The Swiss don’t condone this type of activity. The Swiss police contributed to the investigation that led to the arrests. That doesn’t matter, the damage has been done. The fact is that the Swiss banks are still a conduit for laundering drug (and other illegal) money; the Swiss banks are continuing to facilitate capital flight and tax evasion from Switzerland's direct neighbors.

Any bargaining position that the Swiss had with the EU countries regarding tax treaties that would have maintained the essence of banking secrecy has been shot to hell over the revelations. Switzerland will have to fold its cards, end banking secrecy and give up the “names” of European black account holders.

There are an awful lot of people who are crapping in their pants over this development. The list of pant shitters includes any European with a black Swiss account, it most certainly includes a bunch of bankers in Geneva, Chiasso, Lugano, and Zurich.

This is what the money changers have been doing forever in Asia (and probably elsewhere) to circumvent capital controls. Want to take money out of Cina? Go to the nearest money changer, who will send the money to his cousin in Hong Kong, who will give it back to you there at 90%. Neat. That's why Asian cities are *packed* with money changers...

And by the way, did you know that still today, you can open a bank account with several EU banks *without* passport? Switzerland has been in crosshairs for the past 20 years because it dared staying out of the EU and other political reasons, but it's very clear to any observer with a bit of expertise that if you want to launder a couple of billions, you steer clear of it and just go to London or NY. Or, for smaller scale operations, just set up a few accounts in several small towns in the EU and nobody will ever get you.

please let me know the banks, or where, i can open a bank account without a Passport (Govt tag) ...i very much welcome the civil way to conduct business (ie. treat customers like adults) rather than the current suspicuous tosser way of doing biz (ie. treat customers like liars or potential terrorists)

My British bank was exchanging Sterling for Swiss Francs 10% off spot. Past 2 days in Geneva I exchanged my Sterling at 2% off spot

My pillows, duve and mattress are now rammed with Swiss Francs, my thanks once again to the Swiss National Bank for fulfilling the King Cnute role and allowing me to sleep peacefully (with a big Cheshire Cat grin)

Not quite sure to understand your point. Those people have been unmasked and are in jail, awaiting trial and most likely heavy sentencing. On the other hand when Wachovia helped laundered tens of billions of Mexican drug money all what happened in was very limited fine...

The writer needs some private lessons, although he seems to live in Switzerland, but he definitely is not up to date. But nevertheless, nice writing. Big laundring will always take place in only one place, the US. They protect you. The Swiss are handing over the names, the Yankees won't.

I don't see how the "Blood Money" graffiti is appropriate. How is marijuana smoking connected with blood loss?

Second, does anyone really believe that ending Swiss banking secrecy will end marijuana smuggling? Smugglers will always find ways to launder their money. And a growing (pun intended) number of people feel that marijuana should be legalized.

It does appear that Swiss banking secrecy is coming to an end because governments want to raid the contents of the black accounts. But the Europeans are very resourceful and I have no doubt that a minor industry will spring up to help people get their money out of their accounts. The French and Italians are expert tax cheats.

the front page of The Times newspaper of Britain on Monday was dominated by a field of 'experts' (ex Police, MI5, brain surgeons etc) reporting to its Govt that the "Drug War is Lost" and that drugs are actually good for you (like smoking in fact)

this follows a U.N. report some years ago, consisting of ex-U.N. Chief Kofi Anan and other wags such as Virgins Richard Branson, also reporting the abject, total and miserable failure of all Govts across the globe to win the war on drugs

we don't need Govt experts to tell us Govt meddling in any facet of the economy or society, not just drugs, is also a total and complete f'ing failure

UniCredito was bailed out by Gaddafi to the tune of billions in the GFC. But the bankers didn't want to pay it back, so NATO jets took to the skies, Susan Rice said "oh oh humanitarian bombing". Gaddafi was about to receive a UN Humanitarian award, dinner with Tony Blair, then all of a sudden he was the worst guy in the world.

Before Big Pharma joined the cabal, reefer madness started out as a conspiracy between DuPont (who didn't want competition from hemp clothing), Hearst (who didn't want to admit he'd made a bad investment by buying up tracts of forest for his papers), and Aslinger (a racist SF cop who wanted yet another excuse to lock up minorities).

Never mind that you can't get high by smoking hemp. This fact didn't register with a gullible public and corruptible congress.

HSBC is the #1 bank for drugs. Has been for centuries. Opium wars. Check. Afghanistan. Check. Columbia and Mexico. Check.

It even funds are presidential election coffers. Where do you think Obama got his money in 08 and this year? It wasn't from individuals donating under 200 dollars. It was from foreigners throwing their drug money into the campaign. Usually via the internet.

Those of you looking for an Islamic connection will be interested in knowing that the bank was run by three brothers named Mardoche, Nessim and Meyer. Perhaps Mr. Krasting can shed some light these unusual names.

Instead of laundering drug money, they should just focus on being a TBTF bank. Not only would they be protected, they would get bailed out (showered) with billions, even trillions of fiats, while paying fines of just fractions of cents on the dollar.

Stupid war on drugs strikes again. It's many tentacles wreaking havoc in so many different ways.

HSBC is not a Swiss bank, it is the world's mosty widely recognized money laundering bank. This is he same HSBC Swiss subsidiary that leaked thousands of names of customers to the French, cooincidence? I think not. That this HSBC Swiss subsidiary has been breaking Swiss law comes as no surprise. Nor is it a surprise that Bruce Krasting would portray this as being an issue of Swiss banking and not of the war on drugs. Just like he blames tax problems on "tax cheats" and not on the parasitic state he loves and supports.

In all this I do not get from the article where the money that was recieved for the drugs is. I guess it never had to travel to Morocco? So then, what's the fuss about 8%-tax fraud commission, the big fish is still there??!!